Q: The psychological make up of individuals cannot be overstated when making financial decisions. For example, I have done well with EIF over the years; great management, fiscally conservative yet growth oriented, good industries . It’s been “ up and to the right “ for years. I do not intend to sell this long term winner , but yet when I look at it to deploy new money , I think “ It’s at all time highs, too expensive , don’t buy “. Weird eh ?
5i Research Answer:
This is very common; one way around it is to ask yourself 'why are other investors buying this?'. 'What do they see?'. Keep in mind no one buys with the intention of losing money. We would also note that 'bigger' often means 'higher'. As a company transitions from small cap to mid cap, a whole new set of investors looks at the company for the first time and are willing to pay more as size and liquidity improves.